Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

Does Your TMS Measure Up?

Value of a transportation management system

What makes a good transportation management system (TMS)? One could argue that since the value of a TMS depends on the objectives of each organization, and the complexities of their supply chains, there is no single answer to this question. Even so, there are some basic requirements that help to make a TMS worth the investment in the technology. 

Whether you are shopping for a new solution, upgrading an existing TMS, or evaluating the performance of your existing system, here are some pointers that might help you to decide your next course of action.

Is it gaining acceptance?

Does the TMS have the capability to translate complex procurement strategies to sound execution? Many shippers believe that acceptance rates among truckload carriers should be high; of the order of 80% to 90%. This may or may not be reasonable depending on various factors such as the volume of freight on a lane, but whatever rate and procurement strategy you deploy make sure that the TMS has the capabilities to support your needs.

Three stumbling blocks

If you have opted to manage a TMS in-house then watch out for these three potential pitfalls.

–  The ongoing IT resources you need to maintain the system are not as accessible as you assumed (see next point for more on this).

–  You failed to pave the way for the TMS by developing business processes that are geared to maximizing its benefits

–   Not enough attention was given to hiring and training the staff you need to operate the system to its full capacity. Retaining qualified staff can be challenging. In many companies the career opportunities for logistics personnel are relatively limited, and individuals that have software competencies have other options.

Nail down IT resources

As a general rule TMS solutions require ongoing IT support, so it is important not to underestimate the resources you will need in this department. This can become particularly apparent when IT resources are stretched. For example, is your company going through some sort of upheaval such as an acquisition? If so, be careful that you are not left high and dry when looking for input from IT. A case in point is when you need to add the new business from the acquisition to your in-house TMS solution, only to find that the IT support you need to do the job has been diverted to other integration projects. Moreover, you might find that it will be a while before you can make those much needed enhancements to the system.

The price must be right

Companies that have outsourced their transportation management needs to a single-source third-party logistics services provider (3PL) need to make sure that they have clear pricing and service agreements. If the 3PL is not incentivized by the margins it is earning or the performance measures used, the shipper might not receive an optimal TMS solution.

Consider RPM, if you are a heavy truckload shipper

Can the system track the weighted average rate per mile (RPM) over time of your freight movements? Comparing this figure to the RPMs of publicly traded trucking companies is a quick and easy way to gauge the performance of your network.

How does the system compare?

The effectiveness of truckload services can be measured by comparing current and historical performance levels, by comparing current performance with market standards, and by setting actual performance alongside what you planned to achieve. But using any of these evaluation methods is much more difficult when the TMS solution is not up to the task. Not only are you not deriving maximum value from the solution, you are missing out on some important ways to improve competitiveness.

Up to scratch on bids

If you are a user of constraint-based bidding tools, operating a TMS that is not attuned to these tools does not make sense. For example, the system should be capable of separating out lanes and allocating the loads between carriers.

Finally, before opting for a TMS solution determine which ones deliver the balance between cost and savings that you are looking for. This might sound obvious, but there are many alternatives out there and it is easy to become lost in the details when evaluating the right solution for your business.

TMS evaluation challenges are among the issues addressed in a new Explores … report published by the Council of Supply Chain Management Professionals (CSCMP) and authored by Kevin McCarthy and Chris Brady from C. H. Robinson Worldwide. For more information on the Deriving Strategic Advantage from Truckload Procurement Explores report contact http://cscmp.org/

- Director of Consulting Services, C.H. Robinson
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